PROFITABILITY UPDATES FOR PATTAYA HOTELS & EEC IMPLICATIONS TO HOTEL SECTOR Nikhom Jensiriratanakorn, Horwath HTL Annual Survey of Hotel Operations Annual Study Advisory Board PATTAYA vs THAILAND Thailand Business Mix – YE 2018 Thailand Nationality Mix – YE 2018 Thailand Key Markets – YE 2018 Greater Hua Hin / Chiang Mai / Bangkok Koh Samui Pattaya Phuket Cha Am Chiang Rai # Hotels 79 50 15 14 18 23 Occupancy 80% 76% 72% 71% 72% 82% ADR (THB) 3,277 3,864 3,823 3,072 6,833 2,553 RevPAR (THB) 2,628 2,955 2,738 2,182 4,898 2,104 (in millions) Total Rev PAR 1.57 1.56 1.48 1.26 2.53 1.06 Total Exp PAR 1.01 1.00 1.06 0.81 1.57 0.64 GOP PAR 0.56 0.56 0.42 0.44 0.96 0.41 GOP % 36% 36% 29% 35% 38% 39% Thailand Key Markets – YE 2018 Greater Hua Hin / Chiang Mai / Bangkok Koh Samui Pattaya Phuket Cha Am Chiang Rai Room Exp 22% 22% 24% 22% 18% 21% F&B Exp 68% 69% 76% 69% 71% 69% Total Dep Exp 39% 36% 41% 35% 33% 35% A&G Exp 9% 10% 12% 12% 12% 10% S&M Exp 7% 6% 7% 8% 7% 5% R&M Exp 4% 6% 6% 5% 6% 5% Utility Exp 5% 6% 6% 5% 5% 6% Total UDOE 26% 28% 31% 29% 29% 26% GOP % 36% 36% 29% 35% 38% 39% Thailand Key Markets – YE 2018 Thailand by Price Points – YE 2018 THB1,500- THB2,500- THB3,500- < THB1,500 >THB5,500 THB2,500 THB3,500 THB5,500 # Hotels 40 51 45 53 36 Occupancy 73% 78% 77% 78% 75% ADR (THB) 1,127 2,008 3,014 4,416 8,315 RevPAR (THB) 821 1,572 2,336 3,459 6,257 (in millions) Total Rev PAR 0.45 0.81 1.28 1.98 3.66 Total Exp PAR 0.31 0.52 0.81 1.28 2.37 GOP PAR 0.14 0.28 0.47 0.70 1.29 GOP % 31% 35% 37% 35% 35% Thailand by Price Points – YE 2018 THB1,500- THB2,500- THB3,500- < THB1,500 >THB5,500 THB2,500 THB3,500 THB5,500 Room Exp 26% 23% 22% 21% 20% F&B Exp 66% 69% 69% 68% 71% Total Dep Exp 38% 36% 37% 38% 38% A&G Exp 15% 12% 11% 10% 10% S&M Exp 5% 6% 6% 7% 7% R&M Exp 5% 5% 4% 5% 5% Utility Exp 8% 7% 6% 5% 5% Total UDOE 31% 28% 27% 26% 27% GOP % 31% 35% 37% 35% 35% Thailand by Price Points – YE 2018 Thailand by Price Points – 5 Year Trend PATTAYA vs ASEAN RESORTS Key ASEAN Resort Markets 4 Star Hotels & Below – YE 2018 Vietnam <USD120 Pattaya Bali Phuket Coast # Hotels 20 69 26 18 Occupancy 81% 74% 76% 60% ADR (USD) 58 61 70 81 RevPAR (USD) 48 45 53 48 (in thousands) Total Rev PAR 23 22 26 28 Total Exp PAR 15 15 16 17 GOP PAR 8 7 10 11 GOP % 35% 33% 38% 40% Converted at THB32.61 per USD Key ASEAN Resort Markets 4 Star Hotels & Below – YE 2018 Vietnam <USD120 Pattaya Bali Phuket Coast Room Exp 24% 24% 22% 19% F&B Exp 71% 67% 64% 60% Total Dep Exp 35% 38% 33% 33% A&G Exp 12% 13% 12% 9% S&M Exp 6% 5% 6% 6% R&M Exp 5% 6% 5% 4% Utility Exp 7% 6% 7% 8% Total UDOE 30% 29% 29% 27% GOP % 35% 33% 38% 40% Key ASEAN Resort Markets 4 Star Hotels & Below – YE 2018 EASTERN ECONOMIC CORRIDOR EEC Synopsis “Economic catalyst, attracting USD43 billion FDI by 2022 vs USD9 billion in 2017” Infrastructure Development Completion • Highspeed Eastern Rail Route 2023 • Mabtapud Port (Phase 3 expansion) 2025 • Laemchabang Port (Phase 3 expansion) 2025 • Aircraft Maintenance, Repair and Overhaul (MRO) Center 2022 • Utapao International Airport 2023 • Motorway from Pattaya to Utapao 2020 • Dual-track railway connecting Bangkok (Hua Mak) to 3 ports in EEC 2023 EEC Synopsis EEC Promotional Zones for new investments in targeted industries • Eastern Airport City 6,500 rai, Rayong (Utapao Airport) • EEC of Innovation (EECi) 3,000 rai, Rayong (Wangchan district) and Chonburi (Sri Racha district) EECd • Digital Park Thailand (EECd) EECi 709 rai, Chonburi (Sri Racha district) EECi • 21 EEC Industrial Estate Promotional Zones 28,666 rai, 12 Eastern in Chonburi and 8 in Rayong Airport City EEC Synopsis Major Demand Generators I) Existing Industries • Development & Construction – BBS Joint Venture, Grand Consortium: Utapao Airport – Zhengzhou Airport Economy Zone (ZAEZ): Aerotropolis development – CP Group: High-speed rail and Mabtapud industrial park – GPC: Laemchabang Port – WHA: 9 Industrial Estates • Oil & Gas – PTT: Expansion – B Grimm: Powerplants – Amata BIG: Gas supply • Manufacturing – Construction material: Xiamen Golden Egret Special Alloy Co (GESAC) – Automotive: Chinese and Japanese firms EEC Synopsis Major Demand Generators II) First Targeted Industries Next generation automotive, smart electronics, advanced agriculture and biotechnology, food processing, and high-wealth and medical tourism III) New Targeted Industries Digital, robotics, aviation and logistics, comprehensive healthcare, and biofuel and biochemical – Alibaba’s e-commerce park, Chachoengsao – EEC Digital Park, Si Racha, Chonburi – Airbus’s aircraft MRO center joint investment with Thai Airways, Utapao – Air Asia’s MRO center – Government’s genome sequencing facility EEC Synopsis Major Demand Generators IV) Potential Tourism – Ferry and cruise from Pattaya to Hua Hin, Pranburi and Rayong, and Pattaya to Koh Kong and Sihanoukville (Cambodia) – Ecotourism (fruit farms and community lifestyles) – Medical and wellness tourism – MICE (PEACH, Nongnooch Tropical Botanical Garden, and new facilities) Comparable Success Stories Songdo City, South Korea Yokohama City, Japan Comparable Success Stories Changi Airport / Jewel / Expo / Changi Business Park, Singapore Comparable Success Stories HK Airport / Disneyland / Sky City / Ngongping Buddha, Hong Kong “OPPORTUNITIES” Opportunities in the Hospitality Sector • Demand volume and growth beyond Pattaya • Diversity (business segments, source markets, industries, price points) • Weekday-weekend parity and less seasonality • Repeat business (Bangkok stories), benefiting more than mainstream attractions • Stability (economic center vs resort destinations) • Local & expat consumptions (accommodation, F&B, MICE, recreation) • Investors appetite and capital appreciation • Exit strategies • Development and operational efficiencies “RISKS” Risks in the Hospitality Sector • EEC materialization & ramp-up • Delays • Shifting trends • Demand and supply growth • Regional competition • Wrong product and pricing for the location • Environmental issues • Insufficient infrastructure • Optimistic underwriting • No hospitality experience “What is Greater Pattaya? How is it DIFFERENT from cities in Thailand and regional destinations? Is it a BEACH or BUSINESS destination? Which city would be ideal benchmarks? THANK YOU Horwathhtl.asia.